The return on total assets ratio is obtained by dividing a company’s earnings after tax by its total assets. This profitability indicator helps you determine how your company generates its earnings and how you compare to your competitors.
For example, a business with $200,000 in earnings after tax and $1.6 million in total assets has a return on total assets ratio of 12.5%. This metric helps the owner assess whether the business is using its assets effectively compared to competitors in the same industry.
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